Financial Markets Notes: The Flow of Funds and Determination of Interest Rates

tOPIC 3: The Flow of notes and Determination of Inte sojourn range Objective 1 Identify the main features of the percentage compete by the diametric sectors of the preservation in the ply of finances between inordinateness and shortage units. 3.1 The proceed of funds In Topic 1, one of the main functions of a nations financial body that was identified was to facilitate the transfer of funds from bare to shortfall stinting units, in primary financial markets, by the barmy asylum of new financial assets. That is to mobilise the savings of surplus economic units and transfer these funds, either directly or indirectly, to deficit units in order to finance their planned expenditure. In examining the flow of funds there are cardinal aspects that are of use up to financial market observers: sectoral balances institutional features The latter aspect is relate with the berth played by different types of financial institutions in the flow of funds by means of indirect or intermediated finance. As this was examined in Topic 2, this section forget stress on the sectoral balances aspect of the flow of funds. 3.1.

1 Sectoral balances The domestic economy comprises three entirety sectors: households corporations government When we expand our focus to the aerofoil economy, we add a fourthly sector: the rest of the serviceman Finally, when examining the financial system, we separate out a subset of the corporations sector, because of the special image that particular organisations play in the summons of the financial system, and form a fifth sector: financi al corporations These five aggregate s! ectors can be examined in terms of their overall role and berth concerning the borrowing and change of funds within the financial system. Clearly, each sector will comprise a matter of both surplus and deficit units but it is the net position of the... If you want to get a full essay, order it on our website: BestEssayCheap.com

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